Banking

Banking Sector in India

October, 2012

Introduction

India has a robust banking system, governed by stringent regulations. An intense supervision by the Reserve Bank of India (RBI) has resulted in stringent regulatory and compliance requirements on capital adequacy and risk management practices which have strengthened the overall banking system in India.

Key Statistics

According to RBI’s ‘Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks’, December 2011, Nationalised Banks, as a group, accounted for 52.1 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 21.9 per cent. The share of New Private Sector Banks, Old Private Sector Banks, Foreign Banks, and Regional Rural Banks in aggregate deposits was 13.9 per cent, .8 per cent, 4.5 per cent and 2.9 per cent, respectively. Nationalised Banks also held the highest share of 51.2 per cent in the total bank credit followed by SBI and its associates at 22.5 per cent and New Private Sector Banks at 13.8 per cent. Foreign Banks, Old Private Sector Banks and Regional Rural Banks had shares of around 5.2 per cent, 4.8 per cent and 2.5 per cent, respectively.

Another statement released by RBI revealed that banks' advances grew 0.1 per cent to US$ 913 billion in July-September 2012, while deposits expanded by 1 per cent. The RBI projects credit growth at 17 per cent and deposit growth at 16 per cent in 2012-13.

Foreign exchange reserves stood at US$ 294.81 billion for the week ended September 28, 2012 wherein the value of gold reserves was recorded at US$ 28.133 billion and that of foreign currency assets (FCAs) was at US$ 259.96 billion.

Recent Developments

Export-Import Bank of India (Exim Bank) has partnered with IL&FS Financial Services (IFIN) to facilitate accessibility to Indian companies for CNH bond markets as well as other international bond markets which are not dominated in US Dollar, Euro and Yen. The memorandum of understanding (MoU) gives broad clauses of co-operation between the two entities on a bond guarantee facility programme which will facilitate a credit enhancement mechanism to Indian bond issuers in international bond markets.

Working further on its innovation finance programme for the micro, small and medium enterprises (MSME) sector, Small Industries Development Bank of India (SIDBI) has entered into a EUR 53 million (US$ 68.53 million) - loan agreement with KFW Germany. SIDBI aims to promote entrepreneurial innovations in MSME sector, particularly those involved in clean technologies. The scheme also aims to provide financing instruments specially customised to the needs of the MSMEs.

India’s second largest private bank HDFC Bank has opened its first representative office in Abu Dhabi to render financial services to a large customer base of non-resident Indians (NRIs) staying in the UAE. The new office will help NRIs open accounts in India and will also offer remittance services, fixed deposits and other related banking services.

IDBI Bank has received internationally recognised BS 25999 certificate from Intertek India, a global certification agency. The bank has become India’s first public sector bank to get certified for its business continuity management (BCM) process, for comprehensive coverage of major business and support functions. The honour clearly authenticates bank’s dedication towards customer satisfaction, quality of services, better performance and regulatory compliance.

The State Bank of Bikaner & Jaipur (SBBJ) has opened a unique and first-of-its kind financial supermarket in the city. The branch, which will not be a conventional one, will offer a wide range of diversified products and services. It will primarily aim at cross-selling by offering non-standard products such as insurance (both life and general), credit card and mutual funds. The supermarket will sell products of its channel partners namely SBI Life, Mutual Fund, SBI General and SBI Card, both across the counters and through electronic means.

India’s third largest private bank – Axis Bank – has entered into a strategic agreement with Tata AIG General Insurance wherein the latter would be its corporate agent for general insurance. Tata AIG will leverage on bank’s wide distribution network to offer general insurance solutions to its clients. This initiative by Axis Bank aimed at broadening insurance cover options while offering Tata AIG’s proclaimed Customer and Claims service to its' customers across the country.

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